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Time Warner Cable Video Losses Continue, ‘Cord-Cutting Continues Apace’

Time Warner (NYSE: TWX) Cable’s earnings suggest that cable companies are not done seeing a steady erosion of video customers. The company said it lost roughly 128,000 residential video subscribers last quarter, ending Q3 with about 11.9 million customers in that segment. On the plus side, internet services added 89,000 customers, ending the quarter with 9.8 million, a trend that has also been seen lately at TWC and its cable company peers. All of which led CEO Glenn Britt to admit during the call that “cord-cutting is continuing apace.”

That doesn’t necessarily mean that TWC thinks that consumers are turning to over-the-top services like Roku or (certainly not last quarter) Netflix (NSDQ: NFLX). Instead, as most cable companies say, subscriber losses are due primarily to the weak economy, particularly the poor housing starts and persistent unemployment, which has forced consumers to give up expensive cable services. Later in the call, however, Britt did concede that OTT services appeared to be having some impact, but “No one I know knows how to measure that.”

Internet access, however, is showing signs of how necessary that connection is, however. Plus, it’s a lot less pricey than video subscription.

In the meantime, Britt said the company is working on improving its own OTT service, the TWC iPad app, which allows authenticated viewing over the company’s wi-fi connection. The company is working on expanding the app to other tablets, though Britt did not identify which ones.

“We’d love to turn the set-top box into an iPad, but It isn’t easy to serve hundreds of channels with a remote control,” Britt said. “But we’re making progress.”

In a research note, Bernstein’s Craig Moffett’s reaction to the quarter’s results was, “Now we know why CEO Glenn Britt calls broadband his ‘anchor product.'”

Moffett added that “Time Warner Cable’s broadband-first transition is downright scary. As pure-play video providers, profitability is unsustainable when their direct competitors, the cable MSOs, are experiencing video falling margins. DirecTV (NYSE: DTV) and Dish Network (NSDQ: DISH) will have to allow their own margins to similarly contract… or risk being priced out of the market.”

Some of the highlights from TWC’s Q3 included:

— Revenue derived from each customer was up 3.4 percent.
— Residential services revenue gained 2 percent to $4.3 billion.
— Business services revenue rose 35 percent to $387 million.
— Advertising revenue slipped 3 percent to $216 million.